The plunging price of gold is an expression of hope by the markets

Gold is the ultimate hedge against bad stuff. If people are selling it, maybe things aren't so bad.

One of the big market stories of the day is the continued decline of precious metals. The price of gold is almost 20 per cent off its late 2012 high of $1,794 per oz, and a huge chunk of that fall has happened in the last two weeks – this morning alone, it's down 3.8 per cent and is still falling.

It's always tricky to read anything into market movements, unless they're as obvious a boom-and-bust cycle as something like Bitcoin, and that goes double for something like gold. It, and precious metals in general, have semi-unique fundamentals, because nearly all of their worth is tied up in the collective agreement that they are valuable. A bar of gold is worth money because everyone agrees it is worth money; contrast that with a barrel of oil, which can be used to make things and provide energy, or a share in a company, which might pay dividends.

But the price of gold isn't just driven by unpredictable speculation. The whole thing is wrapped up in beliefs about the nature of fiat currency, inflation, and macroeconomics. Joe Weisenthal explains:

On one hand you have established economists, who believe the government has tools at its disposal to address a crisis. These tools include deficit spending and a violent expansion of the Fed’s balance sheet.

Conversely you have critics who slam the arrogance of economists and central planners, and who have predicted that all of this economic acrobatics would result in an economic collapse, hyperinflation, and an explosion in the price of gold. Gold is important to their worldview, because it represents a quasi-money that’s not tied to any government or central bank.

Investing in gold is a rejection of government money and finance. Money flowing into gold-related assets represents a belief that rocks (however shiny they are) are a better place to invest than human endeavors (like stocks).

You can see this belief reflected in the tendency sites like ZeroHedge have towards showing things priced "in gold". So, for instance, the S&P priced in gold has been shrinking since 2000: the idea is that gold is still the only real money, and must therefore be the point from which all other observations are made. (Paul Kedrosky took this to its logical conclusion, charting the price of gold in gold)

But regardless of the reasons for the collective agreement that gold holds value, it does. And that means it has some properties as an investment vehicle. Traditionally, it's thought to be good to own in periods of high inflation and poor growth in the value of the stock market, and Paweł Morski points out what the logical conclusion of that is:

Gold – unlike bank deposits, equity or bonds, or even banknotes – is separate from the real economy: it’s what you invest in when you want to take a breather from what’s happening in the real economy. That’s actually only a sensible thing to do in pretty extreme circumstances. Gold returns are utterly crushed by equity markets in the long term – to a really astonishing degree for those economies where we have continuous equity markets.

Compared with shares in pre-revolutionary China or pre-war Poland, gold returns look pretty good. Gold is less an index of how confident we are that our leaders a) want to b) know how to do the right thing as it is an index of how sure we are that they won’t completely and utterly screw the pooch.

Also worth quoting is Morksi's absolute belter, because just look at it:

I have nothing to say about the Gold Standard other than it’s the obvious solution for those who feel the main problems with the euro are that it’s too flexible and covers too few countries.

Gold is an oddity, but the people who buy it say something very real about faith in the economic system. It may not be particularly good for hedging against downsides within that system, but as one of the few ways people can hedge against the total breakdown of order, it has a purpose. The continued slide, therefore, is a rare sign of hope in these beleaguered days. Some people, at least, think we're further from armageddon than we used to be.

Gold bars. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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To heal Britain’s cracks, it’s time for us northern graduates in London to return home

Isn’t it time for people like me, who’ve had privileges and experiences not open to everyone, to start heading back to our local communities, rather than reinforcing London’s suffocating dominance?

I’m from Warrington. The least cultured town in the UK. My town.

I moved to London almost exactly five years ago. Not because I particularly wanted to. Not because I wanted to depart the raucous northern town that I still call home. Because it was my only choice, really. I’d done my stint in the call centres and had some fun. But that couldn’t, surely, be my lot?

After university, I’d already started feeling a little weird and out of place back in Wazza. There were fewer and fewer people who didn’t look at me like I’d just fallen off a futuristic space flight that’d given me a different accent and lofty ideals.

Of course, that’s because most people like me had already skipped town without looking back and were all in the capital trying to strike beyond the ordinary.

The young, the cities, the metropolitan elite are still reeling after last week’s vote and wondering how people, half of our people, have got it so horribly wrong. We’re different, divided, done for.  

One thing I’ve clung onto while I’ve been in London is the fact that I’m from Warrington and proud. It might not be a cultured town, but it’s my town.

But I wasn’t proud of the outcome of the EU referendum that saw my town vote 54.3 per cent to 45.7 per cent to leave.

To be fair, even in my new “home” borough of Hackney, east London, the place with the third-largest Remain vote, one in five people voted for Brexit.

Yes, in one of London’s hottest and most international neighbourhoods, there are quite a lot of people who don’t feel like they’re being taken along to the discotheque.

Perversely, it was the poorest places in the UK that voted in largest numbers to leave the EU – that’s the same EU that provides big chunks of funding to try to save those local economies from ruin.

In many ways, of course, I understand the feelings of those people back in the place I still sometimes think of as home.

Compared to many suffering places in the UK, Warrington is a “boom town” and was one of the only places that grew during the last recession.

It’s a hub for telecoms and logistics companies, because, ironically, its good transport links make it an easy place to leave.

But there are many people who aren’t “living the dream” and, like anywhere else, they aren’t immune from the newspaper headlines that penetrate our brains with stories of strivers and scroungers.

Warrington is one of the whitest places in the UK, and I’m sure, to many locals, that means those immigrants are only a few towns away. There’s already a Polski sklep or two. And a few foreign taxi drivers. Those enterprising bastards.

We have never seriously addressed the economic imbalance in our economy. The gaping north-south divide. The post-industrial problem that politicians in Westminster have handily ignored, allowing the gap to be filled by those who find it quick and easy to blame immigrants.

When schemes like HS2, which is plotted to smash right through the place I grew up, are pushed against all of the evidence, instead of a much-needed, intercity Leeds to Liverpool investment to replace the two-carriage hourly service, it’s like positively sticking two fingers up to the north.

But I am also a big problem. People like me, who get educated and quickly head off to London when things aren’t going our way. We invested in ourselves, sometimes at state expense, and never really thought about putting that back into the places where we grew up.

There weren’t the right opportunities back home and that still stands. But, rather than doing something about that, people like me lazily joined the gravy train for London and now we’re surprised we feel more kinship with a 20-something from Norway than we do with someone who we used to knock on for when we should have been at school.

That’s not to suggest that our experiences in the capital – or mine at least – haven’t made us a thousand, million times better. 

I’ve met people who’ve lived lives I would never have known and I’m a profoundly better person for having the chance to meet people who aren’t just like me. But to take that view back home is increasingly like translating a message to someone from an entirely different world.

“You know, it’s only because you live in a country like this that a woman like you is allowed to even say things like that,” assured one of my dad’s friends down at the British Legion after we’d had a beer, and an argument or two.

Too right, pal. We live in what we all like to think is an open and tolerant and progressive society. And you’re now saying I shouldn’t use that right to call you out for your ignorance?

We’re both Warringtonians, English, British and European but I can increasingly find more agreement with a woman from Senegal who’s working in tech than I can with you.

It’s absolutely no secret that London has drained brains from the rest of the country, and even the rest of the world, to power its knowledge economy.

It’s a special place, but we have to see that there are many people clamouring for jobs they are far too qualified for, with no hope of saving for a home of their own, at the expense of the places they call home.

It’s been suggested in the past that London becomes its own city-state, now Londoners are petitioning to leave the UK.

But isn’t it time for people like me, who’ve had privileges and experiences not open to everyone, to start heading back to our local communities, rather than reinforcing London’s suffocating dominance?

We can expect local governments to do more with less, but when will we accept we need people power back in places like Warrington if we want to change the story to one of hope?

If this sounds like a patronising plan to parachute the north London intelligentsia into northern communities to ensure they don’t make the same mistake twice... Get fucked, as they say in Warrington.

It was Warrington that raised me. It’s time I gave something back.

Kirsty Styles is editor of the New Statesman's B2B tech site, NS Tech.